Nifty support seen at 5000 in near future

The market continued the winning streak for a third consecutive trading session, as the Nifty gained 71 points to close at 5088 on Wednesday. Total open interest (OI) went up by Rs 7,026 crore to Rs 1,01,932 crore. Nifty futures added 10% in OI, while stock futures added 1.7%.

Nifty March futures, which were at a premium of 6 points on Tuesday, had been trading at a discount to the spot Nifty since the beginning of the trade on Wednesday and finally closed with a 6-point discount. Now, put data along with a hefty 10% rise in Nifty futures OI and it is evident that a lot of short build-up has happened at higher levels on Wednesday. This, in turn, indicates that market participants have turned cautious at these levels.

Another interesting observation is that since the expiry of February series, an OI of Rs 23,038 crore has been added which is the highest addition in absolute terms on expiry plus 3 trading sessions basis since April 2006. Out of this Rs 23,038 crore, Rs 13,236 crore came in the form of an addition in Nifty options.

On Tuesday, there was a huge activity in options where Puts across the board added open interest and IVs went down, indicating Put writing. A substantial activity was witnessed on the options front on Wednesday. Put call ratio inched up from 1.24 to 1.27, mainly on the back of higher addition in puts.

The 5000 Put, which added maximum OI among puts on Tuesday, also added highest OI of 36,736 contracts on Wednesday, which indicates market players' expectation of 5000 acting a strong support in near future. Technically, 5200 will act as a major resistance, while 4800 would act as a major support.